Apple Offers Cash and Vouchers to Calm Irate Parents, Settle Suit

Many parents hand iPads or iPhones to kids who crave the latest must-play gaming app. The parents who sued Apple in a 2011 class action case, however, say the company should have set up better defenses for unauthorized in-app purchases by their kids. Apple's offer of iTunes credits and cash, however, may help knock down any criticism or negative publicity.

Apple has proposed a settlement of a lawsuit stemming from children making purchases within iOS applications without their parents' permission. The settlement, expected to be approved by a federal judge Friday, could cost Apple tens of millions of dollars.

The class action litigation was filed in April 2011 in a federal district court in California after parents discovered unknown charges on bills ranging from a few dollars to as much as $1,000.

After the problem was brought to Apple's attention, the company imposed additional requirements for in-app purchases: An Apple account password must be entered before buying items within games and other apps.

Once the settlement is approved, notices will go out to some 23 million iTunes account holders. It is not known at this time how many of those will be participating in the settlement.

Settlement Details

According to the proposed settlement, Apple users affected by the lawsuit may either choose to receive a US$5 credit for the iTunes store or make a claim for an aggregate amount for more than $5.

Claims for an aggregate amount must include the date an in-app purchase was made and the purchase price for each item.

Consumers making aggregate claims must also swear that they bought what they say they bought, did not enter their iTunes password so the purchases could be made, or give their password to a minor who used it to make the purchases. They must also not have already received a refund for the purchases.

People who no longer have an iTunes account can receive a settlement of their aggregate claims in cash. Current iTunes users can receive their aggregate claims in cash if the claims amount to $30 or more.

Most of the claims from the settlement are expected to be in the $5 category, according to the settlement filed by the court.

"Because a significant majority of in-app purchases in qualified apps are under $5, this option provides a simplified claims process to class members that would
result in complete relief to most members of the class," the settlement stated.

Unusual Settlement

Apple did not respond to a request for comment for this story. An attorney representing the consumers in the case, Joshua D. Snyder of
Boni & Zack, declined to comment on the settlement. "Let the court filings speak for themselves," Snyder told MacNewsWorld.

However, Michael S. Denniston, an attorney with
Bradley Arant Boult Cummings, indicated the settlement appears to be a generous one. "They expect most people will be receiving a full refund," he told MacNewsWorld. "That's a little bit unusual."

The case doesn't appear to set any precedents that could impact the technology industry, Denniston said. "It's something that Apple might have to worry about, and maybe Android, but that's about it."

In the lawsuit, Apple's opponents claimed that the company violated California's consumer protections laws by failing to adequately disclose that some games, often offered for free and containing content suitable for children, included the ability to make in-app purchases.

The plaintiffs also alleged that each in-app purchase by a minor represented a separate sales contract that can be revoked by the minor's parents, who should receive restitution for the buys.

Just A Glitch

Apple's proposed settlement is just the latest in what appears to be a string of brand-tarnishing events for the company in recent weeks. The settlement alone, though, isn't likely to tarnish Apple, according to Tim Bajarin, president of
Creative Strategies.

"I doubt that this will have much of an impact on Apple's public image," he told MacNewsWorld.

"The actual events took place a year and a half ago. If Apple's image was going to be hit, it would be hit at that time," Bajarin added. "These types of glitches happen, whether it's an Apple or Google or others, all the time."